South Africa Feasibility Study

SOUTH AFRICA: HOUSEHOLD BIOGAS FEASIBILITY STUDY

January 2008

Prepared on behalf of Biogas for Better Life An African Initiative

South Africa National Household Biogas Feasibility Study Page ii

B I O G A S F O R B E T T E R L I F E , A N A F R I C A N I N I T I A T I V E

Acknowledgements

This study was made possible through financial and logistical support provided by The Netherlands Directorate General for International Cooperation (DGIS). Under a contract with DGIS, South Africa-based AGAMA carried out an initial study last year. Following this, Messrs. Julio Castro and Suresh Hurry undertook a mission to South Africa on behalf of the Biogas for Better Life An African Initiative in late November/early December 2007 to refine and supplement the AGAMA report, with the ultimate objective of formulating a final report that would pave the way for a smooth transition from a study phase to actual implementation. This final report combines valuable background information provided in the AGAMA study and the findings of the Castro/Hurry mission. The support of DGIS and all local stakeholders in South Africa is gratefully acknowledged.

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EXECUTIVE SUMMARY

South Africa is a country faced with pressing developmental challenges. Paradoxically, the country has a well-advanced, world-class economy. This first economy is largely thanks to the good business infrastructure, mineral resources, manufacturing, and financial services sectors. To the casual observer, the dichotomous nature of the economy is often un-noticed, resulting in the second economy that is epitomised by rural poverty, minimal formal education and massive unemployment being overlooked. South Africa is in this developmental context similar in many respects to other developing countries as far as energy is concerned: there is great reliance on non-renewable sources of biomass (in the form of fuel wood) in these rural areas, with its associated environmental degradation in the form of deforestation and soil erosion. The existing non-sustainable consumption of fuel wood represents approximately 8% of the total primary energy supply in South Africa. The impacts on the environment through the harvesting of these fuels, the impact on indoor air quality and the resulting health problems, and the lack of access to cleaner energy are well documented and understood. The service delivery programmes to address the backlogs in the rural areas still has serious delays, and it is therefore appropriate that this feasibility study has been undertaken to understand the technical scale of the opportunity for moving households in these rural areas to a cleaner energy, and generally more sustainable and self-reliant, future. In this report a range of factors are considered, including climatic conditions, access to feedstock (dung) for anaerobic digestion to produce the required amount of biogas, institutional aspects (including private sector supply chains, importing/adapting of digester designs from abroad, government actors, non-government actors), financial aspects (including hardware costs, and quantification of other costs and benefits) and linkages between these different components. While there is no policy specifically relating to rural energy supply using biogas, the Department of Minerals and Energys (DMEs) White Paper on Energy Policy clearly points to biogas as a means to satisfy rural energy service needs. Accordingly, the DME has keenly supported this study. In addition, numerous government and non-governmental organisations have expressed a keen interest in and support for the programme, as have a range of micro-finance institutions. Though the institutional framework for the implementation of the programme is not yet clear, there are definite expressions of interest and support for taking this further by a number of key stakeholders. These stakeholders include the DME, and Departments of Trade and Industry (DTI), the National Development Agency, the Provincial Government of Eastern Cape and the Umsobomvu Youth Fund. There are many good reasons supporting the start of a household biogas programme in South Africa, and excellent government support programmes are in place to develop the programme as a public-private partnership. The country has excellent supporting infrastructure in the form of government services, financial services, skills and micro-finance is assured, while the mechanisms for making credit available still need to be established. The market conditions appear to be in place to initiate a programme. At the same time, household biogas in South Africa is currently being implemented at a promotional level. This means high quality, high cost installations with the need for economies of scale to bring costs down. There are many opportunities for cost reductions that will flow from research and development in this area, as well as transfer of the vast body of knowledge arising from the Nepalese and other national biogas programmes. A programme, starting on the basis of a detailed five-year implementation plan, would aim at the end for ongoing cost reductions and implementing quality products at a national programme level, to allow for the job creation potential of constructed biogas plants at scale to be fully realised. The issue dealing with revenue generation for the programme through the mobilisation of carbon credits, either through mandatory or voluntary mechanisms, has not been addressed in this study, as discussions on how to maximise it are still on-going within the Biogas Initiative. However, once a clear position has been established, generation of revenues through carbon credits will be integrated into the implementation plan and such revenues will be utilised for up-scaling the national household biogas programme. The primary outcomes of the study are: There are (conservatively) 310,000 households (9.5% of South Africas rural households) showing

technical viability to participate in a rural biogas programme (these are the households that inter alia

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have 4 cows or more, do not have access to grid electricity, and are situated within a 1km radius of water). There is also a demand for the environmental and social benefits biogas would bring to technically viable areas of the country.

Using the most conservative assumptions throughout, and with the capital subsidy for a biogas

programme at 30%, the programme would have significant financial and economic benefits: 25% and 64% financial and economic internal rates of return respectively, averaged across the six provinces investigated. The highest value attained from a programme is in the Eastern Cape, which has a 40% financial IRR and an economic IRR of 78%.

The indicative programme design is based on a five-year programme installing biogas digesters in

12,000 households in the Eastern Cape and KwaZulu-Natal provinces, targeting households and community groups that can afford to pay 10% of their monthly income during five years, and a 10% upfront payment.

The implementation of 12,000 biogas digesters would require a capital outlay of approximately US$

17.5 million, over five years. Of this, the end-users will contribute a total of US$ 1.4 million in down-payments plus US$ 8.3 million as credit. The programme will require US$ 4.2 million as a subsidy and US$ 3.6 million for programme and technical support, totalling US$ 7.8 million.

Micro-finance institutions have indicated that credit to a programme of this scale could be made

available in the range of 2.5% to 3% per month, which would be aimed at households earning more than ZAR 2,500 per month. These credit interest rates are very high compared to many other countries.

There are a myriad of stakeholders interested in the programme, some of whom have expressed a

clear desire to be involved in its rollout. These include the DME, the Provincial Government of Eastern Cape, the NDA and the Umsobomvu Youth Fund.

Implementing the programme presents an opportunity to co-ordinate various rural developmental

programmes under one banner, and as a result to harmonise different public funding streams in capital and operational subsidies

The specific recommendations arising from this study are that: A national household biogas programme should be implemented in South Africa, and located in two

provinces, starting in Eastern Cape and followed shortly thereafter in KwaZulu-Natal.

That DME install as soon as possible a Steering Committee to guide the start of the implementation process.

The planning process including negotiations with the Biogas Initiative should be expected to last for

up to 12 months. During this period a detailed programmed implementation plan will be developed, co-ordinated by the DME.

The programme should establish, even during the implementation planning stage, strong linkages with other biogas programmes in Africa, and with the SNV networks in Southern and Eastern Africa.

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TABLE OF CONTENTS

EXECUTIVE SUMMARY iii

TABLE OF CONTENTS v

1. Introduction 8

2. Background 9 2.1 Objectives 9 2.2 Benefits and impacts of a National Household Biogas Programme 9

3. Country background 11 3.1 Geography and physical characteristics 11 3.2 Demography 12

3.2.1 Population distribution 12 3.2.2 Land utilisation 12

3.3 Economy 12 3.4 Weather 14 3.5 Cooking and staple foods 15 3.6 Energy situation 15

3.6.1 Overview 15 3.6.2 Energy needs assessment 15 3.6.3 Poverty and energy 16 3.6.4 Energy and health 16 3.6.5 Gender and energy 16

3.7 Energy policy 17 3.8 Fertiliser usage in agriculture 17 3.9 Environment 17

4. History and experiences with household biogas 19 4.1 South African experience with small-scale biogas 19

5. Assessment of technical factors for disseminating biogas plants 21 5.1 Nepalese digester GGC 2047 21 5.2 Cost of investment 21

5.2.1 Cost to construct a 6m3 digester 22 5.3 Technical potential assessment 24 5.4 Household energy supply and demand 25 5.5 Technology receptivity 26 5.6 Conclusions 26

6. Financial and economic analyses 27 6.1 Financial analysis 27 6.2 Economic analysis 29 6.3 Discussion and conclusions 29

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7. Stakeholder organisations and initiatives 31 7.1 Finance 31

7.1.1 Co-operatives 31 7.1.2 Microfinance institutions 31

7.2 Government 31 7.2.1 Department of Minerals and Energy (DME) 32 7.2.2 The Department of Agriculture (DOA) 32 7.2.3 Department of Trade and Industry (DTI) 32 7.2.4 Department of Environmental Affairs and Tourism (DEAT) 32

7.3 Government agencies and initiatives 32 7.3.1 The South African Bureau of Standards (SABS) 32 7.3.2 The National Development Agency 33 7.3.3 The Umsobomvu Youth Fund 33

7.4 NGOs 34 7.4.1 Women in Oil and Energy South Africa (WOESA) 34 7.4.2 Tsogang Water & Sanitation 34 7.4.3 Heifer International 34 7.4.4 Khanya - African Institute for Community Driven Development 34

7.5 Summary 34

8. Preliminary programme implementation plan 36 8.1 Programme design 36 8.2 Main features of the programme 36

8.2.1 Private sector development 36 8.2.2 Subsidies and quality control 36 8.2.3 Micro-financing 36

8.3 Institutional aspects 37 8.4 Implementation plan 37 8.5 Elaboration of a quality control strategy 40 8.6 Programme planning for Eastern Cape and Kwa-Zulu Natal 40 8.7 Indicative programme costs 41

9. Conclusions and recommendations 42 9.1 Conclusions 42 9.2 Recommendations 42

REFERENCES 44

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LIST OF ABBREVIATIONS BCC Biogas Construction Company

CBO Community Based Organisation

CER Certified Emissions Reduction

DOA Department of Agriculture

DME Department of Minerals and Energy

DEAT Department of Environmental Affairs and Tourism

DPLG Department of Provincial and Local Government

DTI Department of Trade and Industry

EIRR Economic Internal Rate of Return

FIRR Financial Internal Rate of Return

IRR Internal Rate of Return

LPG Liquefied Petroleum Gas

Mt MegaTonne (tonne x 106)

MW Mega Watt (kW x 103)

MWh Mega Watt Hours (kWh x 103)

NBSC National Biogas Steering Committee

NDA National Development Agency

NGO Non-governmental Organisation

PIO Programme Implementation Office

PJ PetaJoule (J x 1012)

PV Photovoltaic

RE Renewable Energy

UN United Nations

UNDP United Nations Development Programme

US$ United States Dollar

UYF Umsobomvu Youth Fund

VAT Value Added Tax

ZAR South Africa Rand

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1. Introduction The feasibility study takes place against a backdrop of increasing poverty in the rural areas of South Africa, difficult service delivery (specifically water, sanitation and electricity related) in these areas and high costs associated with such services. Additionally, electricity shortages are increasing as typified through the marked increase in blackouts across the country over the past number of months, hitting rural areas the hardest. The timing of this study is, therefore, opportune in that it builds on the opportunities for poverty reduction that are implicit in the integrated application of biogas technology in these rural areas, and at a time when there are clear directives at national, provincial and local government levels to address these rural-area problems through programmes at national, provincial and local levels. A national household biogas programme is likely to address more than just the rural energy issue. It has all the ingredients to also address income and food security, it offers a link between the so-called first, or formal, and second, or informal (especially rural) economies, and has all the credentials to make a significant contribution to general health and sanitation. In this context, a biogas programme can be viewed as an economic development/infrastructure and social improvement programme with an energy security base. It is, therefore, evident that a national household biogas programme can contribute significantly to achieve a range of the Millennium Development Goals. Biogas technology, at its simplest form, involves the use of digesters that are vessels in which animal and/or human waste and other bio-degradable materials are broken down (digested) by bacteria in the absence of oxygen. These digesters are often below ground, while the digestion process produces both a methane-rich gas (biogas) that can be used as a fuel for cooking, lighting, and power generation via an internal combustion engine for example, and a nutrient rich liquid fertiliser (bio- slurry). Therefore, biogas is a safe, affordable and sustainable source of energy, and the digestion process, as a positive externality, produces the bio-slurry. Combine this energy and fertilizer-producing technology with water harvesting techniques, and it is possible to run food gardens even in some of the most adverse climatic conditions. Biogas is therefore indeed the key to unlock a comprehensive rural economic development strategy that can contribute significantly to improved and sustainable livelihoods.

This national rural household biogas feasibility study is aligned with the objectives of the Biogas Initiative that focuses on household installations. Many other permutations are also possible such as the commercial sectors and the urban environment, but, arguably, the biggest need for such a programme is among rural households. This report, therefore, provides some background to this project and then presents some salient facts concerning the South African economy. Thereafter, some examples and previous experiences will be offered followed by a section describing the cost of the digesters and the technical supply and demand requirements for the success of such a programme. This information has been ground-truthed through a series of surveys. Financial and economic analyses are then offered followed by a proposed implementation plan. Lastly some concluding remarks are furnished.



2. Background AGAMA Energy was commissioned to undertake a feasibility study for household biogas in South Africa within the context of the broader Biogas for Better Life: an African Initiative under the auspices of the Directorate General for International Cooperation and funded by the Ministry of Foreign Affairs of The Netherlands. The Department of Minerals and Energy (DME) provided a letter of support for this study to be conducted since biogas is considered a potential fuel and key strategy within the stated objective of broadening the energy mix of South Africa by including renewable energy sources. A national biogas programme can help the South African government to achieve its stated targets for the use of renewable energy of an additional 10,000 GWh by 2013. AGAMA submitted its revised report in early November last year. This was followed by a mission to South Africa by Messrs. Julio Castro and Suresh Hurry, on behalf of the Biogas for Better Life An African Initiative, in late November/early December 2007 to refine and supplement the AGAMA report and with the ultimate objective of formulating a final consolidated report that would pave the way for a smooth transition from a study phase to actual implementation. 2.1 Objectives The purpose of this study is to inform a national rural household biogas digester programme. The objectives of the study are to: Elaborate the history of biogas utilisation in South Africa, and current activities. Assess the market potential for household biogas, including:

o End-user demand for biogas in combination with potential supply capacity. o Appropriate methods for technology cost reductions. o Willingness and ability to pay for services provided under the programme. o Commercialisation options for household biogas.

Assess the finance requirements and indicate what international, national, provincial, local and private sources would be willing and capable to provide finance.

Assess the policy and institutional arrangements to set-up a national plan of implementation for a household biogas programme.

Propose the provinces for implementation. Formulate an implementation plan. 2.2 Benefits and impacts of a National Household Biogas Programme Biogas technology can play an important role to improve the quality of life for rural households where the technology has been introduced. Additional expected impacts include: Improvement of hygienic conditions, especially of women and children, by eliminating indoor air pollution and by

stimulating better management of dung (the stable is cleaned and the dung fed into the digester on a daily basis) and night soil (latrine attachments, where socially acceptable).

Reduction of the daily workload (primarily of women) in the households (wood collection, cooking, cleaning cooking utensils) since operations and maintenance activities relating to the digester require minimal labour. Biogas does not require constant attention or blowing on the coals, so the user can put a pot on the burner and perform other activities while the food is being cooked.

Protection of natural resources: o Combat soil depletion: the organic materials that are fed into the plant are used without being destroyed. The

nutrients and organic matter are still available in the bio-slurry and should be returned to the soil. o Reduce deforestation by reducing the consumption of fuelwood. o Reduce erosion: bio-slurry sustains the amount of organic matter in the soil, improving infiltration rates and

water holding capacity and hence reducing run-off and limiting soil erosion. o Reduce harmful emissions (at local and global level): burning biogas is cleaner than burning biomass. Apart

from being smokeless, it emits only CO2 and H2O to the atmosphere during combustion whereas a wood fire generates a much greater level of pollution. Burning biogas does not contribute to global warming, because the fodder used to feed the animals uses an equal amount of CO2 in the ecological cycle (referred to as carbon neutrality).

Household-level benefits:



o Energy and fertiliser substitution, e.g. reducing the need to buy expensive fuelwood and chemical fertilisers. o Additional income sources, since time saved can be used in more directly economically productive ways. o Increasing yields in animal husbandry and agriculture by using the full potential of digester effluent as

organic fertiliser. If properly stored, treated and applied to the fields, biogas slurry has a higher fertiliser value than ordinary farmyard manure.

Macro-economic or societal benefits: o Import substitution (fossil fuels and fertilizers). o Health. o Job creation: These jobs would be generated in the regions where the programme is active, through the staff

of biogas companies, by the labour required for the production of appliances and building materials and through the unskilled labour used during the construction of the plants.

Introduction of biogas does not necessarily change traditional patterns in the division of labour. Strategic gender needs are thus not specifically addressed by biogas, although some should be designed into a biogas programme through, for example, training of females to become masons/supervisors during construction, and maintenance workers during the O&M phase. However, in many cases the reduction of workload can be considered as a pre-condition to make opportunities available for women to organise and attend meetings, engage in income generating activities, increase skills and awareness through training courses, etc.

Assessed against the Millennium Development Goals (MDG) the national biogas programme would deliver the following benefits: MDG 1, target 1: to halve extreme poverty. Households which install biogas systems are not amongst the poorest

due to the fact that a household must have a minimum number of animals, and the poorest families often cannot afford them. However, the biogas dissemination process and the resulting reduced claim on common ecosystem services do affect the livelihood conditions of (very) poor non-biogas households as well. For example through employment creation and biogas saving on the use of traditional cooking fuels, increasing the availability of these fuels for (very) poor members of the community.

MDG 3, target 4: eliminate gender disparity in education. Predominantly women and girls spend time and effort providing traditional energy services. Biogas directly benefits this group by reducing exposure to the dangers of wood smoke and reducing the workload, extending the amount of time to study or to engage in economic activities.

MDG 4, target 5: reduce by two-thirds the under-five mortality rate. Globally, indoor smoke claims nearly one million childrens lives per year and diseases that result from a lack of basic sanitation cause an even greater death toll. Biogas stoves substitute conventional cook stoves and energy sources, virtually eliminating indoor smoke pollution. On top of that, biogas significantly improves the sanitary condition of the household and its immediate surroundings, lowering the exposure of children to harmful infections. Finally, proper application of biogas slurry will improve agricultural production, contributing to food security for the community, this in turn having a generally positive impact on the community health.

MDG 6, target 8: halt/reverse the incidence of malaria and other major diseases. Biogas virtually eliminates health risks (e.g. respiratory diseases, eye ailments, burning accidents) associated with indoor air pollution. Biogas improves on-yard manure and night-soil management, thus improving sanitary conditions and protecting freshwater sources, lowering the exposure to harmful infections generally related with polluted water and poor sanitation.

MDG 7, target 9: integrate the principles of sustainable development into country policies and reverse the loss of environmental resources. Large scale household biogas programmes positively influence national policies on sustainable development and usually support government policies and programmes that have positive environmental impacts (reducing GHG emissions and the need for chemical fertilizer).

MDG 7, target 10: halve the proportion of people without sustainable access to safe drinking water and basic sanitation. Biogas reduces fresh water pollution as a result of improved dung management and connection of the household toilet to the biogas plant significantly improves the sanitary conditions in the farmyard.



3. Country background South Africa is a country in its thirteenth year of democracy since the inauguration of a popular government in 1994. There are 19 languages, 11 of which have been recognised as official language (viz. all government documentation is printed and available in these 11 languages) with English being the national language. The key cultural groupings are the amaZulu, the amaXhosa, Caucasians and Coloureds. isiZulu, isiXhosa, English and Afrikaans are the most widely spoken languages. 3.1 Geography and physical characteristics

Figure 1: South Africa with 9 provinces and major cities South Africa is located at the southern most region of Africa, and is the worlds 25th largest country with a surface area of 1,219,912 km2. The climatic zones vary, from the extreme desert of the southern Namib in the farthest northwest to the lush subtropical climate in the east along the border with Mozambique and the Indian Ocean. From the east, the land quickly rises over a mountainous escarpment towards the interior plateau known as the Highveld. Even though South Africa is classified as semi-arid, there is considerable variation in climate as well as topography. Six of the nine provinces have a large percentage of their population in rural areas. The provinces with these proportionally large rural populations are Eastern Cape, KwaZulu-Natal, Northwest Province, Mpumalanga, Free State, and Limpopo Province. South Africa is bordered to the north by Namibia, Botswana, Zimbabwe, Swaziland, and Mozambique, and totally encloses Lesotho.

http://en.wikipedia.org/wiki/Deserthttp://en.wikipedia.org/wiki/Mountain_rangehttp://en.wikipedia.org/wiki/Escarpmenthttp://en.wikipedia.org/wiki/Plateauhttp://en.wikipedia.org/wiki/Highveldhttp://en.wikipedia.org/wiki/Semi-aridhttp://en.wikipedia.org/wiki/Climatehttp://en.wikipedia.org/wiki/Topography



3.2 Demography 3.2.1 Population distribution Table 1 shows which provinces have a large percentage of their population in rural areas. The provinces with proportionally large rural populations are Eastern Cape, KwaZulu-Natal, Northwest Province, Mpumalanga, and Limpopo Province (previously called Northern Province). Each of these provinces has at least 58% of their population as rural, except for KwaZulu-Natal, which has about 54% of its population as rural. In the Limpopo province, the rural population accounts for almost 87% of the population [1]. Table 1: Profile of rural population in South Africa [1].

Province Rural Population 1996 Rural Population 2001 Rural % of Total Population 1996

Rural % of Total Population 2001

Eastern Cape 3,897,080 3,936,529 61.8 61.2 KwaZulu-Natal 4,700,589 5,091,375 55.8 54.0 Limpopo 4,364,169 4,573,183 88.5 86.7 North west 1,896,267 2,135,581 56.5 58.2 Mpumalanga 1,690,666 1,834,556 60.4 58.7 Free State 822,353 654,660 31.2 24.2 Northern Cape 208,694 142,267 24.8 17.3 Western Cape 418,918 435,626 10.6 9.6 Gauteng 221,932 246,380 3.0 2.8 Total 18,220,668 19,050,159 44.9 42.5 3.2.2 Land utilisation While many of the countrys poor have no private access to land, in many of the cases where the poor do have access to land, the land is not very productive. One indication of this is a Statistics South Africa census of commercial agriculture conducted in 2002 [2], which show that from 1993 to 2003, there was a decrease in the number of commercial farming units from 57,980 to 4,818. 3.3 Economy Since democracy in 1994, South Africa has achieved a level of macro-economic stability not seen in the country for many years. Such advances create opportunities for real increases in expenditure on social services, and reduce the costs and risks for all investors, laying the foundation for increased investment and growth. By February 2005, the economy was stronger than at any time in the past 20 years. Yet despite the significant advances over the past two decades, South Africa remains a country of two worlds. In essence it is a developing country, yet segments of its economy resemble those of a developed economy. As indicated in Figure 2, the primary sectors, agriculture and mining, contribute 10% to the GDP; manufacturing contributes 19%, and the tertiary sector the remaining 71%, of which business services (19%), trade (14%) and the government (13%) are the largest contributors. These numbers resemble a typical developed economy. The countrys energy consumption levels are also similar to that of a developed country: 2.5 kiloton of oil equivalents (kTOE) per capita, while its electricity consumption is 3.7 MWh per capita (Table 2). Since 93% of the electricity, and much of the rest of the economy, are coal-based (Figure 3), the countrys carbon footprint resembles that of a developed country, namely 0.8 kg CO2 per purchasing power parity US$ adjusted GDP or 7.9 ton CO2 per capita in 2001. It is worth noting that the 8% featured in (Figure 3) as being from renewable sources is almost entirely biomass based and is in fact not necessarily renewable at all.



4% 6%

19%

4%3%

14%12%

19%

19%

Agriculture Mining ManufacturingElectricity Construction TradeTransport Financial services Community services

Figure 2: Industry contribution to real GDP in South Africa: 2003 [3]

70%

25%

5%

Coal Crude oil Renewables & waste

32%

35%

8%

25%

Coal Petroleum Renewables Electricity

Figure 3: Primary (4,876 PJ) and secondary (2,288 PJ) energy supply (1998) [4] Table 2: Selected environmental indicators: 1999 and 20011 [5]

World Low income Lower middle Upper middle South Africa

1999 2001 1999 2001 1999 2001 1999 2001 1999 2001

Population (millions) 5,980 6,130 2,420 2,510 2,090 2,160 570 500 42.1 43.2

Urban population (% of total) 46.4 47.2 31.4 30.8 42.9 45.6 75.4 77.2 50.2 57.6

GDP ($ billions) 30,900 31,100 1,030 1,080 2,610 2,740 2,920 2,420 131 113

Energy Energy Intensity (PPP USD/kg oil equivalent) 4.2 4.5 3.4 4.0 3.6 3.7 4.3 4.9 3.3 4.4

Commercial p.c. energy use (kg of oil equivalent) 1,660 1,690 550 570 1,120 1,210 2,030 1,810 2,680 2,510

Electric p.c. power consumption (kWh) 2,080 2,180 360 350 1,060 1,190 2,480 2,250 3,830 3,750

Share of electricity generated by coal (%) 38.4 39.1 43.5 45.0 41.2 47.0 32.2 19.2 92.6 93.1

Emissions and pollution CO2 emissions per unit of GDP (kg per PPP $ of GDP) 0.6 0.5 0.6 0.5 0.9 0.7 0.6 0.5 0.9 0.8

CO2 emissions per capita (metric tons) 4.1 3.8 1.1 1.0 3.4 3.0 5.5 4.3 7.9 7.9

Although these numbers are high both in relative and absolute terms, they do not reflect a comprehensive picture of the economy. 41% of all households and 74% of rural households use either wood or paraffin for cooking. Notice that 43%

1 Notes: Low-income economies are those with a GNI per capita of $745 or less in 2001 Middle-income economies are those with a GNI per capita of more than $745 but less than $9206 Lower-middle-income and upper-middle-income countries are separated at a GNI per capita of $2975 High-income economies are those with a GNI per capita of $9206 or more.



of the South African population is rural. Also, 56% of rural households depend on remittances and pensions for an income; the national unemployment rate is around 37% and that of the rural population exceeds 52% (data from 2001) [6]. Depending on the poverty measure used, between 45 and 55% of all South Africans lived in poverty in 2001 [7]. Poverty is therefore widespread. The above-illustrated structural dichotomy of a developed economic structure amidst a developing context has led to the labelling of South Africa as having a double-decker economy [8], [9] - an economy with a multiple number of income layers with little or no economic interaction among them. This is an issue stressed by the United Nations Development Programme (UNDP) in stating that South Africa is a country of two societies, one ranked 18th in the world (the top deck) and the other 118th (the bottom deck) based on gross domestic product per capita [10]. 3.4 Weather Climatic conditions in South Africa generally range from Mediterranean in the south-western corner of the country to temperate in the interior plateau, and subtropical in the northeast. The northwest corner of the country has a desert climate. At the same time, temperatures in South Africa tend to be lower than in other countries at similar latitudes - such as Australia - due mainly to greater elevation above sea level. Most of the country has warm, sunny days and cool nights. Temperatures are influenced by variations in elevation, terrain, and ocean currents more than latitude [11]. There is very little difference in average temperatures from south to north, however, in part because the inland plateau rises slightly in the northeast. For example, the average annual temperature in Cape Town is 17C, and in Pretoria, 17.5C, although these cities are separated by almost ten degrees of latitude. Maximum temperatures often exceed 32C in the summer, and reach 38C in some areas of the far north. Frost occurs in high altitudes during the winter months. The coldest temperatures have been recorded about 250 kilometres northeast of Cape Town, where the average annual minimum temperature is -6.1 C. A biogas digester can function in a range of temperatures, approximately from 5 degrees Celsius to 70 degrees Celsius. The bacteria responsible for methane production in an anaerobic biogas digester adapt themselves to a particular temperature setting, and are averse to temperature shocks [12]. Table 3: Climate data for 3 provinces in South Africa [13]

The temperature fluctuations between day and night are no great problem for plants built underground, since the temperature of the earth below a depth of one meter is practically constant. It has been found that the temperature of soil below a depth of about 30 cm is almost constant during the day but seasonal temperature differences do occur. In South African, the operating temperature of an unheated, subterranean biogas digester is roughly in the range 16.5 to 22.5 degrees Celsius (see Table 3). Within this temperature range, an increase in temperature generally means higher microbial activity and thus a faster rate of waste digestion and a higher rate of biogas production.

Climate parameter Month

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Eastern Cape

Temp (oC)

Average 21.7 21.0 19.0 15.7 11.6 7.5 7.6 10.4 13.5 15.5 17.5 19.6

Ave Min 19.6 17.9 13.5 9.1 5.4 2.7 1.3 4.3 6.9 10.0 13.3 16.5 Ave Max 29.2 27.1 25.2 21.8 17.0 12.3 12.7 16.3 20.5 21.9 23.4 25.5

Rainfall (avg, mm) 78.7 77.8 80.6 49.8 27.5 21.9 21.8 34.7 39.3 60.9 72.5 82.2

KwaZulu-Natal

Temp (oC)

Average 21.7 21.0 19.6 16.6 13.0 9.4 9.7 12.8 16.7 18.4 19.5 20.7

Ave Min 19.2 18.6 15.9 10.7 8.8 6.4 6.2 8.6 11.0 13.6 15.1 17.4 Ave Max 24.6 24.1 23.3 21.1 18.0 15.3 14.9 18.5 22.2 22.8 23.1 23.9

Rainfall (avg, mm) 142.6 124.4 107.0 57.9 30.4 21.1 23.3 31.5 54.5 91.8 114.1 123.1

Limpopo

Temp (oC)

Average 22.6 22.3 20.9 1.9 14.3 10.9 11.5 15.0 19.9 21.7 21.9 22.5

Ave Min 20.7 20.3 17.7 13.6 10.6 8.0 7.5 10.6 15.1 18.0 18.8 20.1 Ave Max 25.5 25.1 24.2 21.8 19.0 16.3 16.5 21.2 24.7 25.9 25.2 25.5

Rainfall (avg, mm) 113.2 109.3 76.4 36.5 12.7 7.8 5.4 5.9 15.5 44.5 85.8 104.2



3.5 Cooking and staple foods Maize is the staple food across South Africa. It is typically consumed in a stiff porridge manner, which goes by various names in the different cultural groups. It was reported [14] that the majority of rural inhabitants in the 2001 survey (a) cooked meals at least twice daily and (b) the predominant method of cooking is boiling. This bi-daily routine requiring an efficient thermal fuel lends itself perfectly to the use of biogas. Although no specific data for other parts of South Africa could be found, it is a safe assumption that this is the case in other rural areas of the country, given the same staple diet of primarily maize. 3.6 Energy situation 3.6.1 Overview South Africas electricity consumption (93% of which is coal-based) is 3.8 megawatt hours (MWh) per capita compared to 1.3 MWh for other lower-middle-income countries and 2.5 MWh for upper-middle-income countries (Table 2). Consequently, the countrys carbon-dioxide emissions lie between that of upper-middle-income and high-income countries at approximately 7.4 (metric) tonnes (t) carbon dioxide (CO2) per capita [15]. Most of the population in the rural areas of South Africa is unable to afford cleaner forms of energy than biomass in the form of firewood and animal dung. Thus, even though South Africa has had an excess energy supply for at least the decade starting 1994, many rural households have remained unconnected to the national grid, or if connected, these households have not been able to take full advantage of the benefits offered by electricity due to poverty. Energy supply in rural South Africa consists mainly of biomass (for heating and cooking), electricity (used mainly for lighting and light appliances where available, due to cost), as well as petroleum products in the form of paraffin, petrol, diesel, and LPG. Petrol and diesel are really only suitable for transport because of their high cost. According to the Department of Minerals and Energy (DME) statistics, access to electricity in the rural areas is 54% of households, compared to 79% of households in the urban areas, as of 2003 [16]. There was a great improvement in access to electricity in South Africa in the period 1991 until 1999 [17]. However, there has been a decrease in the electrification rate since 1999, due in a large part to the fact that the households yet to be electrified are far from the existing grid and are costlier to electrify. This phenomenon has already been observed since the inception of Eskoms electrification programme in the early 1990s2. This makes the investment in infrastructure for the electrification of these households economically unfavourable, even though it is government policy to do so. 3.6.2 Energy needs assessment Basic energy requirements are those that include services vital to a dignified basic existence, include cooking, hot water heating, and lighting. Presently, many poor households cannot access the basic energy services necessary for a dignified basic existence. As a result, many resort to whatever is available usually biomass, using conversion technology that is low in efficiency, and often contributing to indoor air pollution. According to Karekezi: the bulk of Bio-fuelled cook stoves meet the bulk of cooking, heating and lighting needs of most rural households in Africa [18]. In South Africa, many of the poor have to resort to using paraffin or wood. According to the 2004 General Household Survey by Statistics South Africa the percentage of households using either paraffin or wood for cooking declined to 35.0% in 2004, as against 37.9% in 2002 [19]. While there is a small improvement, the scale of the need for clean energy services is clear. The gap between the needs and what is presently available to poor households can be closed in a number of ways. The solution that would seem to be more equitable would be to provide poor households the same quality of energy services as the middle class in South Africa (mainly electricity, sometimes with LPG gas), albeit in the smaller amounts needed for a dignified basic existence. The energy would have to be supplied in amounts that will cater for all the basic needs of the household (lighting, cooking, water heating, basic appliances). This would differ from the present approach of the basic electricity subsidy, where the 50 kW per month3 is given to each household but cannot cover all of the household basic energy needs and 50 kWh per month costs around ZAR 20 a month. 2 Eskom is the government parastatal that generates over 98% of the electricity in the country. 3 The amount of free electricity ranges from 0 to 100 kWh/household.month in different municipalities



While the argument to match the technology for the poor with that of the rich has validity, the main problem with this approach is that if all South Africans live exactly as the wealthy households do, then the environment will not be able to sustain the impact on it. South Africa already has twice the world average carbon emissions per capita [20]. The problem of matching standards of living by matching consumption patterns (in terms of quantities and technologies employed) is often expressed by scholars and observers for the global scale. In short, middle and upper income households are engaged in unsustainable consumption [21], [22]. The main point of these considerations is that it is vital that sustainability is pursued together with the quest for equity. 3.6.3 Poverty and energy Poverty shows itself in a number of ways, and is particularly evident and can have drastic consequences in energy affairs. The inability to access convenient, let alone clean, energy services leads to outcomes that make it harder for those trapped in poverty to escape it. The effort and time often associated with the utilisation of low quality fuels and energy conversion technologies decreases the overall productivity of households and communities. The energy deficit in poor households results in practical setbacks such as inadequate lighting (paraffin lamps, candles or wood fires are sometimes the only light), inadequate space heating, inadequate cooking fuel and thus fewer hot, cooked meals, and a short supply of hot water. The setbacks caused by energy poverty in turn have consequences in the standard of living of the poor through illness on a more frequent basis (with consequences on income), difficulty in doing schoolwork and so on. Access to clean and convenient energy services are therefore vital to the alleviation of poverty. 3.6.4 Energy and health Indoor air pollution among the poorer households in South Africa is a major health issue. Figure 4 indicates the relative local emissions of various cooking technologies and fuels.

Figure 4: Local pollutant emissions along the energy ladder [23] Upper respiratory illness resulting from exposure to indoor smoke in households using low quality fuels (generally biomass) and/or inefficient or 'dirty' energy conversion technologies (generally combustion in an open fire), is a major problem in South Africa, as in many countries classified as developing around the world. The Air Quality Bill of 2004 [24], is an attempt to improve air quality in South Africa. The need to shift the poorest households in South Africa away from low quality energy services such as burning coal, firewood and other biomass in an unhealthy (and inefficient) way is vital in South Africa if lives are to be improved. 3.6.5 Gender and energy Decision-making in the rural household around fuels and appliances for energy conversion is an important factor when considering a technology introduction. In a study undertaken in the Northern Province (now Limpopo) it was determined that women are the primary decision makers when it comes to purchasing fuels and their appliances.



3.7 Energy policy The DME is mandated to develop minerals and energy policy for South Africa. The policy position relating to biogas in South Africa is set out in the 1998 White Paper on Energy Policy published in 1998. Under the Section dealing with Access to energy services the policy document has the following to say: It is clear that all South African households require access to a basic level of energy services. Achieving a sustainable level of energy security for low-income households can play a central role in the reduction of poverty, the fostering of households livelihoods and an improved quality of life. Government will determine a minimum standard for basic household energy services, against which progress can be monitored over time and will facilitate the widening of access to such a basic level of energy services, including fuels and related appliances. Basic needs are understood as those requirements essential for human survival. Defining exactly what constitutes a basic energy need, or rather what may satisfy such a need, is not an easy task however. It is also necessary to recognise that the use of some fuels causes intolerable levels of air pollution. From this it is apparent that people must have both access to fuels and that these fuels should not endanger their health in the conversion process. The DME has directly expressed its support for this biogas feasibility, and potential programme, by way of a direct letter to the sponsors of this study. 3.8 Fertiliser usage in agriculture The South African fertiliser industry is largely dominated by 3 primary manufacturers of fertilizers, namely Kynoch (a subsidiary of AECI), Sasol and Omnia (each with a market share of between 20 and 50%). There is also a manufacturer, Indian Ocean Fertilisers, located at Richards Bay manufacturing mainly for the export market. The nitrogenous components required for fertiliser production are derived from ammonia, which is produced by Sasol and AECI. Phosphate rock is locally mined and used in the manufacture of phosphates by Foskor. Products sold by the fertiliser manufacturers in South Africa include materials prepared from local phosphates, imported components, and locally compounded materials. In 2006 the total weight of fertilizer utilized in South Africa was 2,072,877 tonnes [25]. Yet is has been reported that of the 2,051,521 tonnes consumed in 1999, around 442,258 tonnes were imported mainly in the form of potash [25]. This represents approximately 21.5% of total consumption that is imported, resultantly leading to a rapid increase in the price thereof. Unfortunately, these data no doubt refer in the main to the formal commercial agriculture sector. Most of Southern Africa's 20-million farmers are applying small quantities of fertilisers, because of the problems of accessibility and availability. There is an enormous need for (organic) fertiliser that a planned biogas dissemination programme can assist in meeting. There is the additional advantage that the fertiliser arising from the biogas digester as bio-slurry is produced on site and at no additional cost to the household. 3.9 Environment South Africa has a very heavy carbon footprint, comparatively speaking, as is illustrated in Figure 5. The figure shows the global CO2 (per unit of GDP and per capita) as well as per low, middle and high income groups globally. South Africa has a figure of 100 on average relative to the data shown. In absolute terms, South Africa ranked 19th in the top 25 greenhouse gas (GHG) emitting countries of the world in 2000 and is by far Africas largest GHG emitter. It is estimated that in 2000 South Africa contributed 1.2% towards world GHG emissions, despite its relatively small economy and population (44 million people) [26]. This stands in stark contrast to India which contributes about 5.6% to world GHG emissions, despite having a population of more than 1.1 billion, i.e., 25 times greater than that of South Africa. To fully evaluate and appreciate South Africas large carbon footprint from an economic development perspective, in 2001, based on the latest national census, approximately 73% of rural households use either wood or paraffin for cooking purposes, and only 18% have access to electricity. In total only about 60% of households have access to grid electricity [27]. Thus, a very large portion of the countrys population does not have grid electricity and, even some of those who do have access, cannot afford the necessary appliances.



01020

3040506070

8090

100

World Low income Lower Middle Upper Middle

as %

of S

outh

Afri

ca u

sage

CO2 emissions per unit of GDP(kg per PPP $ of GDP) CO2 emissions per capita

Figure 5: South Africas carbon emissions intensity: An international comparison (SA=100) [4]



4. History and experiences with household biogas Biogas digester technology is well established in several countries. Mass dissemination of biogas technology was first initiated in China around 1970 [28]. Subsequently, the technology was implemented on a large scale in India, and Nepal, countries that, in addition to China, now have considerable expertise in biogas digester technology programme implementation. There are a number of South Asian, South-East Asian, African, and Latin American countries where biogas digesters have been constructed, in some cases, in notable numbers. 4.1 South African experience with small-scale biogas The Agricultural Research Council (ARC) has a page on their website entitled Converting cattle manure to biogas [29], that goes on to explain the functioning of biogas and their pilot project. The project involved the installation of a heated floating drum digester. ARC also has a list of biogas publications, with titles such as Biogas users manual, Biogas from cattle manure, Biogas purification, Biogas equipment, and Biogas water pump. This digester under the pilot project was built in the late 1980s. In addition, a fairly recent report prepared by Messrs. Gavin Fleming, Herman Cornelissen and Simangele Dlamini in October 2006 and entitled Mintek and biogas generation in SA provides the following general information: A number of biogas pilot projects have been initiated at various districts in rural KwaZulu-Natal: Two pilot biogas digesters have been installed in the Ndwedwe District outside Durban. One is a residential system with a volume of 9.5 m3 that was commissioned in November 2000. This digester takes input from a toilet and dung from three cows that are kraaled overnight. The digester generates in the region of 3 m3 of biogas each day, enough to cook for the family of eight. Of particular interest is the integration of the digester within the household, since all food and water wastes (viz. grey water) are directed through the biogas plant. It is a common misperception that access to water is a constraint on the application of biogas technology at the household level. Since each family uses water every day, this same water can easily be directed to the biogas digester. The average cost of this system is equal to the cost of LPG, without taking externalities or biogas benefits into account. The second system is at a school with 1,000 learners. It is comprised of two 20 m3 digesters, each fed from an eight-toilet block. Additional gas is generated through the addition of cow dung through separate inlet chambers. This system produces around 16 m3 of biogas each day. The gas has dual end uses: cooking in the domestic science classroom by means of modified gas stoves, and running a modified 5 horse power diesel engine which in turn drives a 2 kW alternating current generator. The biogas is sufficient to cook on four gas plates for eight hours per day, or to run the generator for eight hours each day. The diesel engine operates as a dual-fuel system, since the biogas replaces about 85% of the diesel that would otherwise be normally used. The unit energy costs over a 15-year lifecycle are lower than solar electrification, and can be markedly cheaper than grid power should the grid have to be extended to a particular end-use point. A biogas plant also does not suffer from the security risks faced by a solar installation. Biogas digesters have been installed in several new sustainable villages, such as Oude Molen, Kuyasa (Khayelitsha), Philippi and others (Lisa Thompson-Smeddle and Greg Austin, personal communication). Yeastpro (Anchor Yeast) has considered biogas to treat their yeast waste, which is done in many cases around the world, but say that the viability of such a solution depends on local conditions and that in the case of Yeastpro, it does not make economic sense at this stage. Several other publications document experience with biogas technology in South Africa, but they mostly relate to family/institutional-size installations. However, the focus of the Biogas for Africa An African Initiative is exclusively on household-size installations and while it is understood that many individual-size digesters have been built since the digester technology was introduced in South Africa in the 1950s, there is very little documented information on the countrys experience with such digesters. This, no doubt, will change once the Biogas Initiative becomes operational in the country. There has been a constant demand over the past eight years for biogas digesters, but over the past 12 months there has been a clear interest from a different enquiry source: these include project developers, municipalities, renewable energy fund managers, and the like. In terms of actual systems installed in South Africa, there are conceptual plans to implement demonstration and training projects in different villages around South Africa. These projects are particularly interesting from the perspective of retaining the momentum being generated naturally



through the enquiries and discussions around this feasibility study, and will no doubt allow for some of the assumptions around costs, market demand, affordability etc to be validated. The digester technology that has been implemented in South Africa over the past five years has been of a modified fixed-dome design. In the context of the Biogas Initiative with its emphasis on robust and tested biogas standardized designs that meet local needs and conditions, with the experience with this design in both South Africa and its neighbour, Lesotho, this is the technology basis for the costs (Section 5.2) and financials (Section 6) that are presented later in the report.



5. Assessment of technical factors for disseminating biogas plants There are a number of technical factors that need to be assessed in determining the viability of a household biogas programme in South Africa, which can be separated into harder and softer issues. The hard issues include technology cost, consumer demand, access to feedstock, access to water, and the climatic conditions. Once these are proven, the softer issues need assessing: government support, potential for commercial involvement in a programme, alignment with existing initiatives, etc. In this section the technology costs, overall national technical potential based on critical parameters as well as the anticipated demand for household biogas digester systems are assessed. The costs that are presented relate to a 6 m3 volume fixed-dome digester enough to meet the energy needs of a family of 4-5 persons for cooking and lighting. 5.1 Nepalese digester GGC 2047 With regard to digester design, it is generally accepted that the fixed-dome GGC 2047, developed in Nepal and which has proved its performance and reliability in several Asian countries and is being promoted in African countries (e.g. Ethiopia, Rwanda, etc. under the Biogas Initiative) and adapted as necessary for conditions in South Africa would be the most suitable. The digester is depicted in the figure below.

Figure 6: Drawing of GGC 2047 digester 5.2 Cost of investment South Africa has a challenging economic environment for the introduction of biogas digesters into the rural economy. Looking at key economic indicators the casual observer might form the opinion that South Africa has an economy where the impacts of a strong macro-economic environment might positively impact throughout society. In reality however there is a large disparity in income in the so-called first and second economies, where the latter are as indigent as the poorest countries in the world. Many of these indigent people reside in rural areas. The fundamental issue the programme faces is that the inputs to the macro economy apply equally to these first and second economies, and hence the strong economic environment creates a challenge in terms of the higher costs of



digesters than might be seen elsewhere. The higher cost factors may occur primarily in two areas: materials and labour. There are several measures that can be undertaken to bring down this capital cost. A substantial cost reduction can be obtained through design optimisations and efficiencies created through economies of scale, as well as smart implementation and planning. In planning, the concept of clustering installations, where a number of orders for digesters within a defined geographic area would accumulate until a threshold is reached, provides substantial reduction of costs. 5.2.1 Cost to construct a 6m3 digester The future construction cost for a single digester of this design under a wide-scale programme, as estimated by AGAMA in Annex E, amounts to approximately US$ 1,900, whereas, for example, the cost for the same digester is US$ 859 in the case of Rwanda. In discussions with MPS Builders (in Mthatha) and on the basis of costs of some materials ascertained from a hardware store (in East London), the AGAMA costs were refined and are provided in the table below, side by side with costs for similar items (for comparison purposes) in Rwanda.



Table 4: Rwanda and South Africa: 6 m3 GGC 2047 Digester Cost Comparison (on the basis of costs for wide-scale implementation).

Item Rwanda South Africa*

A Construction materials Unit Qty Unit Cost US$

Total Cost US$

Qty Unit Cost US$

Total Cost US$

Cement bag 13 12.36 160.70 10 7.60 76.00 Lime bag 3.0 2.18 6.50 Water proof cement kg 18.0 2.73 49.10

Sand m 3 2.2 18.18 40.00 Owner Provided

Stone m 3 3.0 18.18 54.50 900** bricks 0.18 162.00

Gravel 3/4 m 3 1.2 18.18 21.80 Owner Provided Reinforcement rod (6 mm) pcs 2.0 5.45 10.90 11 4.50 49.50 Binding wire (2 mm) kg 0.5 1.82 0.90 Small items - - 25.45 Mixer 1 28.50 28.50 Paint litre 1 9.65 9.65 Subtotal construction materials

370.00 325.65

B Pipes and fittings GI pipe (21 mm dia.) pcs 3 21.82 65.50 25m 5.00 125.00***PVC pipe (110 mm)-outlet metre 3 9.09 27.30 2 7.70 15.40 GI pipe fittings 21 mm pcs 12 1.36 16.40 12 1.40 16.80 Subtotal pipes and fittings 109.00 157.20 C Appliances cost Stove set 1 27.27 27.30 1 65.00 65.00 Main valve pcs 1 5.00 5.00 Water drain pcs 1 2.20 2.20 Gas tap pcs 1 3.30 3.30 1 19.30 19.30 Inlet, Dome gas + Rubber hose pipes

71.50 71.50

Subtotal appliances 38.00 155.80 D Labour cost Skilled labour days 10 4.55 45.50 8 28.60 228.80 Unskilled labour days 24 1.82 43.60 11 17.15 188.65 Annual Maintenance Fee 0.60**** Subtotal labour 89.00 418.05 E Construction Charge Transport cost 98.18 100.00 Entrepreneur Overhead (P&G)

154.55 120.00

Company Profit 150.00 Subtotal Construction 253.00 370.00 Total 859.00 1008.65 F VAT (14%) 141.20 Grand Total 859.00 1149.86

* Adapted from AGAMA Report, November 2007. ** On the basis of Uganda for 6 m3 digester. *** This item can be reduced by US$ 100 if PVC pipe covered by gravel for protection against damage from digging

were to be used. **** See Uganda FS: 1.5% max. of capital cost spread over 15 years.

Exchange Rate used: US$ 1 = ZAR 7



It can be seen from the above table that, in the case of South Africa, the 6 m3 household biogas digester of the GGC 2047 design can be constructed for approx. US$ 1,150. The construction costs could be reduced by US$ 100 if PVC pipes were to be used instead of galvanised iron (GI). Additionally, a further reduction of US$ 141 would be possible if the Government were to waive the 14% VAT. This issue needs to be discussed with the Ministry of Finance. 5.3 Technical potential assessment Biogas digesters can process different feedstock, and be implemented in a variety of applications, including the following: Rural households with four or more cows, where the cattle dung can be collected fairly conveniently. Rural households with a diverse mixture of livestock such as pigs, chickens, and goats. Cattle farm where there is a large enough concentration of accessible cattle dung. Sheep, horse, chicken and other farms where there is sufficient supply of accessible animal dung. Institutions such as rural schools where there is inadequate sanitation, but a fairly large number of users.

The emphasis for the household application is on those homes with four or more cattle since a biogas digester would be able to supply all the cooking requirements of the household without any additional inputs of biodegradable resources to the digester. This is based on the widely practised livestock management system, where cattle feed widely in communal areas during the day and are only penned (corralled) at night. Hence to achieve the minimum amount of 20 kg of cow manure 4 cows are required. This approach obviously excludes the poorest in our society, while focussing no doubt on the better off (on a rural relative scale) in the community. Technology extension over time will see smaller cheaper digesters then being more accessible to those with 3, then 2 cows as has been the case in Nepal for example. The primary rural animal ownership across South Africa is that of cattle. There is a strong cultural relationship between cattle ownership and status/wealth in a given community. Given this widespread tie between cattle and rural people, for the purposes of this technical assessment the livestock ownership was limited to only cattle while noting that in pockets there is considerable ownership of pigs, sheep, and goats. It is also worth noting that there is strong correlation between cattle ownership, and cattle management, meaning that the household owners are in control of the cattle. Given the wide range in climatic and historical development status across the nine provinces of South Africa, a first analysis of the number of households that owned four or more cattle was the initial parameter for inclusion in additional analysis. These results are presented in Table 5. The data shown for 2006 were developed from different sets of statistical data: the Rural Survey of 1999 (which presented 1997 data) [31], the General Household Survey of 2005 [19], an assessment of the urban and rural areas in 2001 [1], and the mid-year population census performed in 2006 [32]. Biogas digester systems require a certain amount of liquid per day for the fermentation. In the ideal situation all the urine from the cattle would be captured and represent sufficient liquid for the anaerobic process, with is in the order of 1 component solids to 1 component liquids. Therefore, access to 20 litres of water/day is essential, and this can of course be used water from within the household. Nevertheless, a distance of not more that 1 km from the household is felt to be the maximum distance people should walk to get water. The number of households for whom biogas could be the solution for a better life is approximately 310,000 representing about 9.5% of the rural households in South Africa (Table 5).



Table 5: Number of rural households with biogas potential by province.

Number of households

with 4 or more cows

Percentage of HHs with access to

water (< 1 km)

Number of HHs with access to

water

Percentage of HHs not electrified

Number of HHs with

biogas potential

Total number of rural HHs

Percentage of rural

HHs with biogas

potential Eastern Cape 224,417 82.1% 184,291 59.3% 109,285 692,775 15.8% KwaZulu-Natal 310,206 92.4% 286,500 55.5% 159,007 963,835 16.5% Limpopo 47,727 82.6% 39,418 35.7% 14,072 765,089 1.8% North West 27,740 96.4% 26,730 42.2% 11,280 362,091 3.1% Mpumalanga 22,327 99.9% 22,295 45.8% 10,211 359,240 2.8% Free State 22,770 97.9% 22,300 29.1% 6,489 132,736 4.9% Total 655,187 87.4% 581,534 44.6% 310,345 3,275,766 9.5%

5.4 Household energy supply and demand In an analysis of the household energy utilisation in the thirteen nodal areas comprising the focus of the Integrated Sustainable Rural Development Plan undertaken in 2002 [6], it was noted that 18.3% of households use electricity for cooking while wood is the main source of cooking energy in 53.8% of the households. 19.2% of households use paraffin, while gas and coal comprise 2.6% each. These data are therefore broadly representative of the situation in the focal provinces (Table 6). In a study undertaken in Limpopo [14], it was ascertained that 51.3% of households use wood, 14.9% use paraffin, 25.4% use electricity and 6.9% and 1.2% use coal and gas respectively (based on seasonal data presented and averaged here, for two villages surveyed) for their cooking fuels. In summer an average of 23.5% of the households in the two villages used wood exclusively for cooking while in winter the figure was 21.8%. In a 3-province analysis of rural household energy utilisation [33] between 89% and 94% of households identified wood as their primary cooking fuel. While the information in this 2006 study was not disaggregated according to final end uses it is invaluable in gauging the level of dependency on different fuels as well as the monthly costs being allocated to different fuels but noting that a given fuel may provide multiple benefits/outputs at the same time making the cost allocation to one end use e.g. cooking extremely difficult. Table 6: Cooking fuels in three provinces.

Province

Cooking Fuel % of fuel used for cooking

% users (buyers)

User Expenditure (month, average,

Rand)

Sample average cost in users buying fuels

(Rand) Eastern Cape Paraffin 88% 90% 63.07 56.00

LPG 95% 27% 135.49 37.00 Wood 89% 38% 16.27 6.00

Average monthly expenditure 99.00 KwaZulu-Natal

Paraffin 87% 33% 37.18 12.00 LPG 85% 49% 77.00 38.00 Wood 94% 3% 11.66

Average monthly expenditure 50.00 NorthWest Paraffin 82% 71% 77.42 55.00

LPG 47% 28% 129.82 36.00 Wood 92% 13% 10.63 1.00

Average monthly expenditure 92.00

Source: [33] Wood fuel collection time is also a factor in households deciding to switch fuels from one form to another. In a study performed in five southern villages in Limpopo in 2002 [34], it was noted that the wood fuel collection time per trip



increased from 239 +/- 15 minutes in 1991 to 268 +/- 21 minutes in 2002. The authors also report that 94% of households collected firewood in 2002, while the number of households purchasing firewood increased from 27% in 1991 to 31% in 2002. These data reflect the reliance on (unsustainable) wood fuel in rural South Africa as well as the increasing distances involved in its collection, and the associated increase in households purchasing it. This is supported by data presented in other surveys [33]. 5.5 Technology receptivity The question regarding adoption of a new technology within a household or community is that of ownership through informed choice. In essence, the route into households and communities must take into account high potential winners through locating champions. An example of this is to target, say, the headmen within an area. This requires some intense investment in social facilitation in order to bring about a sustainable programme. There are lessons from other programmes, and methods such as participatory rural appraisal approaches, semi-structured interviews, household surveys that can be used to derive information relating to community stakeholders, the baseline data, community resources and capitals, and skills data. 5.6 Conclusions There is clearly a great potential for a household biogas programme, based on the technical analysis performed in this section. However, there is uncertainty and associated concerns that the information pertaining to current cooking fuels utilisation and their costs are not adequately documented in the literature. Household surveys were therefore deemed absolutely necessary for answering these questions and hence also developing the financial, economic and affordability indicators that are required. The key information derived from the household surveys relates to the cost of cooking energy, and the time taken to collect these cooking fuels. Table 7 presents these key results and identifies the monthly affordability level per household as being ZAR 90, ZAR 113 and ZAR 104 in Limpopo, Eastern Cape and KwaZulu-Natal respectively. The average affordability level is approximately ZAR 100/month. Table 7: Household survey summary.

Average monthly

cooking fuel cost (ZAR)

Average monthly income (ZAR)

% HH income

on cooking

fuels (%)

Average daily cooking fuel

collection time among HHs that collect firewood (minutes)

Minimum amount HHs will pay for biogas system (ZAR)

% of stated payment for

biogas system against average

monthly fuel cost (%)

Indicative average biogas system

affordability level (ZAR)

Limpopo 90 831 10.8 75 167 186% 90 Eastern Cape

148 948 15.6 99 113 76% 113

KwaZulu-Natal

172 1003 17.1 26 104 60% 104

Average 137 927 14.7 67 128 107% 102 The average cost data for fuels presented in Table 7 were used in the financial analysis section later in the report, since they represent more conservative data.



6. Financial and economic analyses 6.1 Financial analysis While the costs would be somewhat similar across the provinces considered, the benefits per province differ as shown in Table 7 (mainly the quantity of collected fuelwood by the households and the costs of purchased fuelwood differ) so the results of the FIRR would be expected to show some differences per province. Three provinces that had the largest technical potential for biogas, in decreasing order are, Kwa-Zulu Natal, Eastern Cape and Limpopo. However, of these three provinces Eastern Cape presented the largest returns in terms of benefits. Hence, the suggestion to select Eastern Cape to launch the Biogas Initiative in South Africa, but to be followed closely by KwaZulu-Natal and others.. For the calculation of the Financial Internal Rate of Return (FIRR) the following assumptions were made: General assumptions Inflation is taken to be 7% a year. Exchange rate of the United States Dollar, US$ 1 = ZAR 7. Exchange rate of the Euro, 1 = ZAR 10. A fixed dome digester can last for 40 years depending on the quality of construction and the materials used.

However, the economic life of a plant is taken as 15 years mainly because any cost or benefit accrued after 15 years will have increasingly less value and hardly influence the value of the IRR.

Costs The unit cost of a 6 m3 biogas plant is taken as ZAR 8,050 (US$ 1,150 see Table 4 above for calculation) including 14% Value Added Tax (VAT). However, there would be some minors cost differences in other provinces; hence, as indicated above, some differences in FIRR would be, naturally, expected. The annual maintenance cost is taken as 1.5% of the capital cost, increasing at 7% (inflation) per year. Benefits The benefits of the programme are wide-ranging and include direct benefits such as avoided cost of purchasing alternative fuels and fertiliser, and indirect benefits such as the reduced time to collect fuelwood and decreased health costs. Similar to the inflation rate, the value of the benefits also increases at 7%. The time savings related to reduced cooking time and the time to look for the fuelwood have not been considered (also the time needed to feed the biogas plant is not taken into account). This is because the households do not perceive the saved time as a financial benefit. For the same reason the avoided health costs have not been taken into account. Therefore, only two real financial benefits are considered, namely savings in the cost of fuel and benefits of using the slurry as organic fertiliser. The average avoided fuel costs per year are for the three provinces is ZAR 744 (US$ 106). This is very conservative estimate since, as indicated in Table 7; the total cooking energy costs indicated by the households which were surveyed is between ZAR 90 and ZAR 172 per month. Small South African farmers do use fertilisers in their lands even though there is suppressed demand due the high costs of these fertilisers. Since one of the components of a biogas programme is the agricultural extension that trains farmers in the use of slurry, it is reasonable to include the avoided costs of the utilisation of the slurry in its totality. The price of the fertiliser is taken as ZAR 2,850 per tonne and the average fertiliser substitution value of the slurry produced by a 6 m3 biogas digester is estimated at 100 kg per year (from Nepal data). Table 8 below shows the FIRR as a function of the different levels of subsidy. For comparison, the FIRRs for Eastern Cape only are shown. It is evident that the FIRR will decrease if the capital costs were to increase and this is demonstrated in the last row of the table, where the capital costs are assumed to be ZAR 10,000 (US$ 1,428).



Table 8: FIRR for different levels of subsidy and two capital costs.

Subsidy level 0% 10% 20% 30%

For the three provinces 16% 19% 22% 25% For Eastern Cape only 26% 30% 34% 40% For the three provinces with a capital cost of ZAR 10,000

12% 14% 16% 19%

The monthly payments to service the loan to finance the biogas plant are shown in Table 9, assuming a subsidy of 30%, and a down-payment of 10%. Table 9: Monthly loan repayments in ZAR.

Term in months

Monthly Interest Rate

1.0% 2.0% 3.0% 12 429 457 485 24 227 255 285 36 160 189 221 48 127 157 191 60 107 139 175

The average fuel cost for the three provinces is ZAR 62 and for Eastern Cape alone is ZAR 99. Including fertiliser savings these amounts are respectively ZAR 86 and ZAR 123. Therefore the monthly instalment costs are higher than the benefits (in fuel and fertiliser savings) for almost all values in the table. This implies that for the development and future expansion of the programme it is crucial that the agreement with micro-finance institutions focus on a specific credit line for biogas with both low interest rate and long repayment term. Given that a minimum wage is ZAR 1,100 the above monthly costs are more than 10% of the possible household income. Therefore, of the 282,000 households (three provinces only) where a biogas installation is technically feasible, it is assumed that at least 10% of them (28,200) should have an income that allows them only to spend 10% of their monthly income for a biogas digester. This estimate is very conservative as, as noted above, households spend on average more in fuels for cooking and lighting and also because the families with cattle most probably have higher monthly incomes than average. Even though the FIRR shows interesting rates of return even without a subsidy it is advisable to start the programme with an appropriate level of subsidy conducive to generating an increased rate of market development. Also the discussion above shows that in order to encourage people to invest in a biogas plant, the costs for the monthly loan repayments should not differ too much from their present expenses for fuel and fertiliser, and this calls for an as large as possible subsidy. The loan servicing costs only occur during the repayment term while the benefits of the biogas plant occur during the likely lifetime of the biogas plant of 20 years. Nevertheless we advise to set up the initial subsidy at 30% of the investment costs, but make it clear from the beginning that as the costs per unit decline and the market confidence increases that this subsidy percentage will decrease.



6.2 Economic analysis The range and level of the benefits for the economic and the financial analyses differ since the financial analysis only includes benefits for the private households, that is, only those benefits that have a direct impact on the cash flow of households. Economic benefits are a much broader concept and include societal benefits and benefits that are not normally associated with cash flows. Costs The capital cost in the economic analysis is not the same as for the financial analysis, because it excludes taxes and subsidies, and is therefore ZAR 7,061 (US$ 1,009), the maintenance costs are the same, namely 1.5% of the capital expenditure, ex-VAT. Included in the calculation are the programme and technical assistance costs estimated to be US$ 300 per digester (ZAR 2,100), this taking into account the initial figures of the Rwanda programme. Benefits Five benefits are monetised, namely: The energy savings, as discussed and calculated under the financial analysis. The time savings of the household (see explanation below). The potential CER revenue is calculated based on 3 ton CO2 avoided per 6m3 digester per year (this is a

conservative value) with a CER value of 7 per ton (ZAR 70/ton). Avoided medical cost based on the biogas feasibility study done for Uganda, adjusting all values for power

purchase parity, are taken conservatively to be ZAR 1,000 per household per year4. The fertiliser value will be realised based on the commercial wholesale price, as in the FIRR. The reasons given above to not include time saved or spent in the calculations of the FIRR, cannot be reasonably argued in the same way as for the EIRR. All biogas programmes show that the time for fetching wood, tending the fire, cleaning pots etc., is drastically reduced by the biogas introduction. On the other hand the time a household spends to manage the digester (fetch water, collect dung and mix it with water) has to be added. We make here a conservative assumption that the net saved time is 1 h per day. This time has a societal value that is included as a shadow cost for rural labour and taken as 35% of the minimum hourly wage, which results in a shadow price for labour of ZAR 2.19 per hour. Based on the above values the following EIRR were obtained: 45% if only energy cost savings, time saved and medical expenses are included. 52% if also the fertiliser value is included. 57% if also the CER revenues are included. 6.3 Discussion and conclusions Despite using generally conservative estimates for the benefits in relation to the outcomes of the household surveys done by AGAMA, both the financial and the economic analyses indicate a consistent and significant net benefit of such a national biogas programme. These values, however, should not be considered without caution. Implementing a national biogas programme is likely to have significant social and institutional challenges to overcome, including financing mechanisms, the roles, and responsibilities of various stakeholders and the affordability of the repayment of the 70% own contribution. The key conclusions of this analysis are: In order for the households to have the same level of monthly loan repayments for the biogas digester as they

have at present time in terms of the expenditure for fuel for cooking and lighting, the appropriate level of capital subsidy should be around 30% (US$ 345).

The affordability analysis indicates that there are at least 28,200 households that could afford to pay for a biogas digester. Those are households that should have an income that allows them only to spend 10% of their monthly income for a biogas digester.

4 The AGAMA study estimated ZAR 4,100 savings to society in medical costs and value of lost lives due to sickness, etc.



It is advisable that households make an initial contribution of 10% of the capital costs, thereby increasing ownership and decreasing the financing costs.

The highest value obtained from a programmatic point of view is in the Eastern Cape, which has a 40% FIRR at the 30% subsidy level and an EIRR of 69%.

The FIRR analysis shows that, from the point of view of the household, investing in a biogas plant is an attractive proposition even if there were no subsidy. However, the justification for the subsidy, especially at the initial stage of the programme, is mainly to allow for increased demand to create a sufficient large (jumpstart) market making it attractive for private companies to come into the market and invest in capacity to build biogas plants (even though the programme will also support capacity development). Furthermore subsidies have been found to be a powerful way to discipline participating private companies by enforcing quality standards and control of the constructed plants. Installation of high quality plants in turn increases confidence in the product and results also in a sustained growth of the market. This subsidy is expected to decline in time and, probably, get eliminated after several years, as the FIRR will still continue to be attractive without it.



7. Stakeholder organisations and initiatives 7.1 Finance 7.1.1 Co-operatives The Co-operative Act no 14 of 2005 defines co-operative as "an autonomous association of persons united voluntarily to meet their common economic, social and cultural need

Documents

South Africa Feasibility Study